Not Happy With Your Irrevocable Trust? Here Are Some Options

by Bruce Givner on February 3, 2015

The following post was taken from our November 2014 newsletter. Click here to subscribe to our monthly newsletter.

What if you have already established an irrevocable trust that you do not like?  What if the irrevocable trust was not established to be flexible as described in the opening part of this Newsletter?  Are there still steps that you can take to make changes?

The answer is a resounding "maybe."  First, under California law (Probate Code Section 15404(a)), a trust can be amended without going to court if the grantor (creator) and all of the beneficiaries agree.  You might be concerned that one of the beneficiaries might not agree to the change.  However, in many situations the beneficiaries will have little choice but to agree because if they fail to do so you can disinherit them from the rest of your estate.  There are several other sections of the California Probate Code under which irrevocable trusts can be changed with the approval of the Probate Court Judge.

Next, what if the irrevocable trust you do not like owns an insurance policy on your life?  Set up a new irrevocable trust with terms that you like.  Deposit enough money into the new trust so that it can buy the policy from the old trust. This way the beneficiaries of the old trust, not all of whom you like, will only receive the current fair market value of the policy, not the ultimate death benefit.

What if the irrevocable trust is going to terminate in the near future and you would prefer to keep the assets in trust for a longer period of time, for example to protect the beneficiaries from their own possible mis-use of the funds?  Have the trustee contribute the assets to an LLC of which you are the managing member or to a limited partnership in which you are the general partner.  This way, when the trust ends, the beneficiaries will get non-marketable, minority interests in an LLC or limited partnership.

In other words, there are often ways to pragmatically deal with an irrevocable trust that you do not like.

 

For more specific recommendations regarding your irrevocable trust, contact us today.

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